What Is a Spousal Surcharge and How Does It Work?
Understand spousal surcharges: what these additional health insurance costs are and how they affect your employer-sponsored family coverage.
A spousal surcharge is an additional cost that some employers add to the premium for health insurance coverage when an employee chooses to include their spouse on the company’s health plan. This surcharge is a way for companies to manage the overall expenses associated with providing health benefits to their workforce. It represents an extra fee beyond the standard premium an employee pays for family coverage.
Defining the Spousal Surcharge
A spousal surcharge is an extra fee applied by an employer to an employee’s health insurance premium when the employee’s spouse has access to health coverage through their own employer but opts to enroll in the employee’s plan instead. The primary purpose of this surcharge is to encourage spouses to utilize available health coverage from their own employers. By doing so, companies aim to control the rising costs of their group health insurance plans. This mechanism helps employers reduce their financial burden by shifting some healthcare expenses to other available plans.
This additional cost is typically a fixed amount added to the monthly premium an employee pays for covering their spouse. It is a common feature in many employer-sponsored health plans across various industries. The surcharge is not a penalty but rather a cost-sharing measure designed to manage the overall pool of insured individuals and associated claims. It directly impacts the total amount an employee contributes for their family’s health benefits.
Conditions for Application
A spousal surcharge typically applies under specific circumstances, primarily when a spouse has access to their own employer-sponsored health coverage that is considered reasonable. Employers commonly impose this fee when the spouse could enroll in a group health plan offered by their own employer but instead chooses to join their partner’s plan. Many employers require employees to attest, often through an affidavit or questionnaire, whether their spouse has access to other employer-sponsored coverage.
The surcharge is generally triggered when the spouse’s available coverage meets certain criteria, such as being deemed “affordable” and providing “minimum value” under general health benefit standards. If the spouse’s own employer offers health benefits that meet these benchmarks, the surcharge is more likely to be applied. Employers establish these policies to encourage the use of primary coverage sources, thus mitigating their own plan’s costs.
How the Surcharge is Determined
The amount of a spousal surcharge is commonly determined as a fixed monthly fee. This fee can vary significantly among employers, often ranging from approximately $50 to $200 per month. For example, an employer might set a surcharge of $100 or $150 per month, which is then added to the employee’s regular payroll deduction for health insurance. This fixed amount provides predictability for both the employer and the employee regarding the additional cost.
In some instances, the surcharge might be calculated as a percentage of the total premium attributed to spousal coverage, though a fixed fee is a more prevalent method. The specific amount of the surcharge is entirely at the discretion of the employer or the plan administrator. It is typically integrated into the employee’s overall premium contribution, appearing as a distinct line item or being factored into the total family premium amount. The employer communicates this additional cost during the annual benefits enrollment period.
Common Exemptions
Employers typically establish various scenarios where a spousal surcharge is not applied, even if a spouse is covered under the employee’s health plan. A common exemption is when the spouse does not have access to any employer-sponsored health coverage through their own job. This includes spouses who are unemployed, self-employed, or work for an employer that does not offer health benefits.
Another frequent exemption applies if the spouse’s own employer-sponsored coverage is deemed unaffordable or does not meet minimum value standards. Additionally, if both spouses are employed by the same company offering the health plan, the surcharge is usually waived. Spouses who are retired, receiving Medicare or Medicaid benefits, or working part-time without eligibility for employer-sponsored benefits are also commonly exempt from the surcharge.